City of Pontiac General Employees' Retirement System · Notes to Financial Statements 8-16 Required Supplemental Information 17 Schedule of Changes in the Plan Net Pension Liability

City of Pontiac General Employees'Retirement System

Financial Report

with Supplemental Information

December 31, 2014

City of Pontiac General Employees' Retirement System

Contents

Report Letter 1-2

Management's Discussion and Analysis 3-5

Basic Financial Statements

Statement of Plan Net Position 6

Statement of Changes in Plan Net Position 7

Notes to Financial Statements 8-16

Required Supplemental Information 17

Schedule of Changes in the Plan Net Pension Liability and Related Ratios 18

Schedule of City Contributions 19

Schedule of Investment Returns 20

Independent Auditor's Report

To the Board of TrusteesCity of Pontiac General Employees' Retirement System

Report on the Financial Statements

We have audited the accompanying statement of plan net position and the related statement ofchanges in plan net position of the City of Pontiac General Employees' Retirement System (the"System"), a component unit of the City of Pontiac, as of and for the year ended December 31,2014 and the related notes to the financial statements, which collectively comprise the System'sbasic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financialstatements in accordance with accounting principles generally accepted in the United States ofAmerica; this includes the design, implementation, and maintenance of internal control relevantto the preparation and fair presentation of financial statements that are free from materialmisstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with auditing standards generally accepted in the UnitedStates of America. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor’sjudgment, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. Accordingly, we express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of significantaccounting estimates made by management, as well as evaluating the overall presentation of thefinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.

1

Carol.Rendak

New Stamp

Carol.Rendak

New Stamp

To the Board of TrusteesCity of Pontiac General Employees' Retirement System

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects,the plan net position of the City of Pontiac General Employees' Retirement System as ofDecember 31, 2014 and the changes in plan net position thereof for the year then ended, inaccordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As discussed in Note 2 to the basic financial statements, in 2014, the System adopted newaccounting guidance GASB Statement No. 67, Financial Reporting for Pension Plans. Our opinion isnot modified with respect to this matter.

Other Matters

Required Supplemental Information

Accounting principles generally accepted in the United States of America require that themanagement's discussion and analysis and required supplemental information, as identified in thetable of contents, be presented to supplement the basic financial statements. Such information,although not a part of the basic financial statements, is required by the GovernmentalAccounting Standards Board, which considers it to be an essential part of financial reporting forplacing the basic financial statements in an appropriate operational, economic, or historicalcontext. We have applied certain limited procedures to the required supplemental informationin accordance with auditing standards generally accepted in the United States of America, whichconsisted of inquiries of management about the methods of preparing the information andcomparing the information for consistency with management's responses to our inquiries, thebasic financial statements, and other knowledge we obtained during our audit of the basicfinancial statements. We do not express an opinion or provide any assurance on the informationbecause the limited procedures do not provide us with sufficient evidence to express an opinionor provide any assurance.

June 12, 2015

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City of Pontiac General Employees’ Retirement System

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Management’s Discussion and Analysis

Using this Annual Report

This annual report consists of three parts: (1) management’s discussion and analysis (this section), (2) the basic financial statements, and (3) required supplemental information. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The financial statements are followed by a section of required supplemental information that further explains and supports the information in the financial statements.

Condensed Financial Information

The table below compares key financial information in a condensed format between the current year and the prior year:

2014 2013

Total assets 492,645,505$ 491,518,785$ Total liabilities 918,710 1,045,898

Net position held in trust for pension benefits 491,726,795$ 490,472,887$

Net investment income 29,515,688$ 91,812,641$

Other - Miscellaneous and litigation revenue 17,453 -

Retiree pension and annuity benefits (27,494,450) (23,946,914)

General and administrative expenses (784,783) (921,629)

Net increase in net position held in trust 1,253,908$ 66,944,098$

Overall Fund Structure and Objectives The City of Pontiac General Employees’ Retirement System (the “System”) exists to pay benefits to its members and retirees. Active members earn service credit that entitles them to receive benefits in the future. Benefits currently being paid are significantly greater than contributions currently being received. The excess of benefits over contributions must be funded through investment income. The public capital markets represent the primary source of investments.


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Management’s Discussion and Analysis (Continued)

GASB Statement No. 67 Implementation

As of January 1, 2014, the System was required to adopt Governmental Accounting Standards Board GASB Statement No. 67, Financial Reporting for Pension Plans, which significantly revises existing guidance for the financial reports of most governmental pension plans. GASB Statement No. 67 introduces significant changes to the timing and manner in which the actuarial valuation is performed, including changes to how the discount rate is calculated for accounting purposes. In addition, significant new note disclosures and required supplemental information schedules are now required. Asset Allocation The System has established asset allocation policies that are expected to deliver sufficient investment income over a very long period of time to satisfy the obligations to pay the benefits promised to the members of the System. The following is a summary of the adopted asset allocation (excluding the collateral pool) as of December 31, 2014:

Domestic equities 55% Domestic fixed income 20% International equities 15% Basket Clause Category Securities 10% Cash 0%

Investment Results In December 2013, the Federal Reserve began to ‘taper’ its extraordinary bond-buying program and made its last asset purchase in October 2014. This program - known as quantitative easing or QE - was intended to provide a boost to economic growth. However, with weak year-over-year economic growth - 2.2 percent for 2013 and an estimated 2.4 percent for 2014 - and inflation stubbornly below their target of 2 percent, the Federal Reserve has continued to provide support to the economy by keeping its interest rate near zero. Inflation expectations could be reduced further by the 40 percent decline in the price of oil that occurred in 2014. In spite of this, the dollar strengthened against all major foreign currencies as investors still expect a rise in U.S. interest rates sometime in the third or fourth quarter of 2015. The fixed-income markets posted positive returns for the year; the Barclay’s U.S. Aggregate Index returned 5.97 percent for the year. The Standard & Poor’s 500 returned 13.69 percent and the MSCI EAFE Index (a proxy for international stocks) was down (4.9) percent. The total plan returned 6.44 percent for the year.


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Management’s Discussion and Analysis (Continued)

Plan Sponsor Financial Condition/Plan Update

The City of Pontiac (the plan sponsor) is experiencing significant financial difficulty. The City was placed in receivership under Michigan Public Act 436 of 2012. The receivership ended in mid-2013 and an administrator (overseen by the Transition Advisory Board) was appointed to supervise the City until such time as fiscal authority is returned to the City’s elected officials. The effects of the 2013 mayoral and council elections on the City’s finances should be minimal as a result. The System is currently overfunded and no employer contributions are required at this time. Should a contribution be required in the future, there is uncertainty regarding the City’s ability and intent to make contributions to the System.

Contacting the System’s Management This financial report is intended to provide a general overview of the System’s finances and investment results in relation to actuarial projections. It shows the System’s accountability for the money it receives from employer and employee contributions. If you have questions about this report or need additional information, we welcome you to contact the System’s office at 2201 Auburn Road, Suite B, Auburn Hills, MI 48326.


Statement of Plan Net PositionDecember 31, 2014

AssetsCash and cash equivalents (Note 4) $ 183Investments at fair value (Note 4):

Short-term investments 25,237,699Government agency notes and debentures 31,846,929Corporate and other bonds 17,667,956Domestic equities 274,924,384Private equity 12,624,692U.S. government mortgage-backed securities 11,985,595Foreign equities 38,133,443Foreign bonds 6,601,174High-yield bonds 18,586,437Commercial mortgage pools 6,435,995Asset-backed securities 7,767,336Limited partnerships 38,679,527

Receivables:Accrued interest receivable 1,441,509Other receivables 712,646

Total assets 492,645,505

Liabilities - Accounts payable and other 918,710

Plan Net Position - Held in trust for pension $ 491,726,795

The Notes to Financial Statements are anIntegral Part of this Statement. 6


Statement of Changes in Plan Net PositionYear Ended December 31, 2014

AdditionsInvestment income:

Interest and dividends $ 9,915,647Net increase in fair value of investments 22,469,444

Less investment advisor fees (2,869,403)

Net investment income 29,515,688

Miscellaneous income 17,453

Total additions 29,533,141

Deductions Retirees' pension benefits 27,494,450

Administrative expenses 784,783

Total deductions 28,279,233

Net Change in Plan Net Position 1,253,908

Plan Net Position - Beginning of year 490,472,887

Net Change in Plan Net Position - End of year $ 491,726,795

The Notes to Financial Statements are anIntegral Part of this Statement. 7


Notes to Financial StatementsDecember 31, 2014

Note 1 - Summary of Significant Accounting Policies

The City of Pontiac (the “City”) sponsors and administers the City of Pontiac GeneralEmployees’ Retirement System (the “System”) (a contributory single-employerretirement plan) that covers substantially all employees and retirees of the City, exceptpolice and fire employees and retirees.

Reporting Entity - The financial statements of the System are also included in thecombined financial statements of the City as a pension trust fund. The assets of thepension trust fund include no securities of or loans to the City or any other relatedparty.

Plan Sponsor Financial Condition - The City of Pontiac (the plan sponsor) wasexperiencing significant financial difficulty. In early 2013, the City was in receivershipunder Michigan Public Act 436 of 2012. The result was that the state had appointed anemergency manager to control the finances of the City. As of the end of fiscal year 2013,the City was no longer under receivership and is now governed by a transitionaryadvisory board. The System is currently overfunded and no employer contributions arerequired at this time.

Basis of Accounting - The System follows accounting principles generally accepted inthe United States of America (GAAP) as applicable to governmental units. Accountingand financial reporting pronouncements are promulgated by the GovernmentalAccounting Standards Board.

The System’s financial statements are prepared using the accrual basis of accounting.Plan member contributions are recognized in the period in which the contributions aredue. Employer contributions are recognized when due pursuant to legal requirements.Benefits and refunds are recognized when due and payable in accordance with theterms of the plan.

Methods Used to Value Investments - Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities tradedon a national or international exchange are valued at the last reported sales price atcurrent exchange rates. Mortgages are valued on the basis of future principal andinterest payments and are discounted at prevailing interest rates for similar instruments.The fair value of real estate investments is based on independent appraisals or auditedfinancial statements. Investments that do not have an established market value arereported at estimated fair value as determined by the System's management. Theseestimates are determined using financial statements issued by the private equitycompanies or limited partnerships in which such investments are held, adjusted bymanagement as deemed appropriate based on known circumstances.

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Note 1 - Summary of Significant Accounting Policies (Continued)

Approximately 11 percent of the System's assets are not publicly traded, and thereforedo not have a readily determinable market value. Because these alternative investmentsare not readily marketable, their estimated value is subject to uncertainty, and thereforemay differ significantly from the values that would have been used had a ready marketfor these securities existed. The difference could be material.

Note 2 - Implementation of GASB Statement No. 67

The System adopted GASB Statement No. 67, Financial Reporting for Pension Plans,during the year. The statement establishes standards for financial reporting that outlinethe basic framework for separately issued pension plan financial reports and specifies therequired approach to measuring the liability of employer and certain nonemployercontributing entities, about which information is required to be disclosed. As a result ofthe implementation of GASB Statement No. 67, the System's financial statements nowinclude new disclosures and required supplemental information focused on the City'stotal and net pension liability.

Note 3 - Pension Plan

Plan Administration - The System's board administers the City of Pontiac GeneralEmployees' Retirement System Pension Plan - a single-employer defined benefit pensionplan that provides pensions for substantially all permanent full-time general employeesof the City of Pontiac, except police and fire employees. Benefit terms have beenestablished by contractual agreements between the City of Pontiac and the variousemployee union representation; amendments are subject to the same process.

The board of trustees consists of 11 members - a member of the City Council to beselected by the City Council, the mayor of the City of Pontiac, the finance director ofthe City of Pontiac, three members appointed by the City Council who are not eligibleto receive benefits under the retirement system, one active member of the Systemelected by the active members, three member trustees elected by active, deferred, orretired members, and one hospital member (could be deferred vested member orretired member) of the System who was formally employed by Pontiac General Hospitalelected via an election conducted by the hospital.

Plan Membership - At December 31, 2013, pension plan membership consisted of thefollowing:

Retirees and beneficiaries 1,132Inactive plan members entitled to but not yet receiving benefits 261Active plan members 32

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Note 3 - Pension Plan (Continued)

Benefits Provided - The System provides retirement benefits as well as death anddisability benefits. Employees may receive cost of living adjustments as a percentage oftheir retirement allowance, pursuant to the collective bargaining agreement oremployment agreement in effect at their date of retirement. The obligation tocontribute to and maintain the System was established by City ordinance andnegotiation with the employees’ collective bargaining units.

Contributions - Article 9, Section 24 of the state of Michigan constitution requires thatfinancial benefits arising on account of employee service rendered in each year befunded during that year. Accordingly, the board of trustees retains an independentactuary to determine the annual contribution. The actuarially determined rate is theestimated amount necessary to finance the costs of benefits earned by plan membersduring the year, with an additional amount to finance any unfunded accrued liability.Contribution requirements of plan members are established and may be amended bythe board of trustees in accordance with the city ordinance, union contracts, and planprovisions. For the year ended December 31, 2014, the active members were notrequired to contribute to the System. The City is required to contribute at an actuariallydetermined rate. In accordance with the actuary recommendation, the City did not haveto make a contribution to the System in the current year. Administrative costs arefinanced through investment earnings.

Pension Plan Investments - Policy and Rate of Return

Investment Policy - The System’s policy in regard to the allocation of invested assets isestablished and may be amended by the board of trustees by a majority vote of itsmembers. It is the policy of the board of trustees to pursue an investment strategy thatmanages risk through the prudent diversification of the portfolio across a broadselection of distinct asset classes. The System’s investment policy discourages the use ofcash equivalents, except for liquidity purposes, and aims to refrain from dramaticallyshifting asset class allocations over short time spans. The following was the board’sadopted asset allocation policy as of December 31, 2014:

Asset Class Target Allocation

Domestic equity - Large cap 25.00%Domestic equity - Mid cap 20.00%Domestic equity - Small cap 10.00%International equity 15.00%Fixed-income - Domestic investment grade 20.00%Fixed-income - High yield 5.00%Private equity 5.00%Cash or cash equivalents 0.00%

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Rate of Return - For the year ended December 31, 2014, the annual money weightedrate of return net of expenses on System investments was 6.76 percent. The moneyweighted rate of return expresses investment performance, net of investment expense,adjusted for the changing amounts actually invested.

Pension Plan Reserves

In accordance with state law, the following reserves are required to be set aside withinthe pension plan:

The retiree reserve is to be computed annually by the actuary as the present value ofestimated benefit payments for all current retirees. The amounts reserved may be usedsolely to pay monthly retiree benefit payments. The reserve is funded by actuariallydetermined transfers from the employer.

The employee reserve is credited as employee contributions are received throughoutthe year; the System maintains a record of the amount contributed by each employee,and credits interest annually at a rate of 4.0 percent. For any employee who terminatesbefore vesting in the pension plan, their balance is returned to them; for those who stayuntil retirement, the balance is transferred into the retiree reserve.

The balances of the reserve accounts at December 31, 2014 are as follows:

Required Reserve

Balance

Retiree reserve $ 248,903,028Employee reserve 960,517

Net Pension Asset of the City

The net pension asset of the City of Pontiac has been measured as of December 31,2014 based on benefits in force as of that date and is composed of the following:

Total pension liability $ 270,151,934Plan fiduciary net position 491,726,795

City's net position asset $ (221,574,861)

Plan fiduciary net position as a percentage of the total pension asset %182.02

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Actuarial Assumptions - The total pension liability was determined by an actuarialvaluation as of December 31, 2013, which used update procedures to roll forward theestimated asset to December 31, 2014. The valuation used the following actuarialassumptions applied to all periods included in the measurement:

Inflation 4.5 %Salary increases 5.6-9.4 % Average, including inflationInvestment rate of return 7.5 % Net of pension plan investment

expense, including inflation

Mortality rates were based on the 1983 Group Annuity Mortality Table.

Discount Rate - The discount rate used to measure the total pension liability was 7.50percent. The projection of cash flows used to determine the discount rate assumed thatemployee contributions will be made at the current contribution rate and that City ofPontiac contributions will be made at rates equal to the difference between actuariallydetermined contribution rates and the employee rate.

Projected Cash Flows

Based on those assumptions, the pension plan’s fiduciary net position was projected tobe available to make all projected future benefit payments of current active and inactiveemployees. Therefore, the long-term expected rate of return on pension planinvestments was applied to all periods of projected benefit payments to determine thetotal pension liability.

The long-term expected rate of return on pension plan investments was determinedusing a building-block method in which best-estimate ranges of expected future realrates of return (expected returns, net of pension plan investment expense and inflation)are developed for each major asset class. These ranges are combined to produce thelong-term expected rate of return by weighting the expected future real rates of returnby the target asset allocation percentage and by adding expected inflation. Bestestimates of arithmetic real rates of return as of December 31, 2014 for each majorasset class included in the pension plan's target asset allocation, as disclosed in theinvestment note, are summarized in the following table:

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Asset Class

Long-termExpected realRate of return

Domestic equity - Large cap 5.34%Domestic equity - Mid cap 6.08%Domestic equity - Small cap 6.55%International equity 5.84%Fixed-income - Domestic investment grade 1.82%Fixed-income - High yield 4.14%Private equity 7.63%Cash or cash equivalents 0.00%

Sensitivity of the Net Pension Asset to Changes in the Discount Rate - Thefollowing presents the net pension liability of the City of Pontiac, calculated using thediscount rate of 7.50 percent, as well as what the City of Pontiac's net pension liabilitywould be if it were calculated using a discount rate that is 1 percentage point lower(6.50 percent) or 1 percentage point higher (8.50 percent) than the current rate:

1% Decrease(6.50%)

CurrentDiscount Rate

(7.50%)1% Increase

(8.50%)

Net pension asset of the City $ 197,165,009 $ 221,574,861 $ 242,482,235

Note 4 - Deposits and Investments

Michigan Compiled Laws Section 129.91 (Public Act 20 of 1943, as amended) authorizeslocal governmental units to make deposits and invest in the accounts of federally insuredbanks, credit unions, and savings and loan associations that have offices in Michigan. TheSystem is allowed to invest in bonds, securities, and other direct obligations of theUnited States or any agency or instrumentality of the United States; repurchaseagreements; bankers’ acceptances of United States banks; commercial paper ratedwithin the two highest classifications, which matures not more than 270 days after thedate of purchase; obligations of the State of Michigan or its political subdivisions, whichare rated as investment grade; and mutual funds composed of investment vehicles thatare legal for direct investment by local units of government in Michigan.

The System is also authorized by Michigan Public Act 347 of 2012, as amended, to investin certain reverse repurchase agreements, stocks, diversified investment companies,annuity investment contracts, real estate leased to public entities, mortgages, real estate(if the System's assets exceed $250 million), debt or equity of certain small businesses,certain state and local government obligations, and certain other specified investmentvehicles.

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Note 4 - Deposits and Investments (Continued)

The System has designated one bank for the deposit of its funds. The investment policyadopted by the board in accordance with Public Act 196 of 1997 has authorizedinvestment in all allowable investments under Michigan Public Act 347 of 2012, asamended. The System’s deposits and investment policies are in accordance withstatutory authority.

The System's cash and investments are subject to several types of risk, which areexamined in more detail below:

Custodial Credit Risk of Bank Deposits - Custodial credit risk is the risk that in theevent of a bank failure, the System’s deposits may not be returned to it. The Systemdoes not have a deposit policy for custodial credit risk. At year end, the System had nobank deposits (certificates of deposit, checking, and savings accounts) that wereuninsured and uncollateralized. The System continues to evaluate each financialinstitution with which it deposits funds and assesses the level of risk of each institution;only those institutions with an acceptable estimated risk level are used as depositories.

Interest Rate Risk - Interest rate risk is the risk that the value of investments willdecrease as a result of a rise in interest rates. The System's investment policy does notrestrict investment maturities.

At year end, the average maturities of investments are as follows:

Investment Fair Value

Effective

Duration

Asset-backed securities $ 7,767,336 1.60 yearsCommercial mortgage pools 6,319,356 2.62 yearsCorporate and high yield bonds 42,855,567 4.64 yearsGovernment agency notes and debentures 31,562,485 17.47 yearsU.S. governmental issued commercial mortgage-

backed securities 284,444 1.65 yearsU.S. governmental mortgage-backed securities 11,985,595 2.54 yearsNongovernment-backed CMOs 116,639 1.06 yearsShort-term investment funds 25,237,699 Unavailable

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Credit Risk - State law limits investments in commercial paper to the top two ratingsissued by nationally recognized statistical rating organizations. The System’s investmentpolicy limits investments in domestic fixed-income securities to not less than a CCCrating for an overall average quality of each high-yield portfolio; the overall quality ratingof each high-grade portfolio must be AA or an equivalent rating; for domestic equityinvestments, the securities must be the equivalent of Standard & Poor’s A1 or Moody’sP-1. As of year end, the credit quality ratings of debt securities are as follows:

Investment Fair Value Moody's

Asset-backed securities $ 2,803,051 AaaAsset-backed securities 1,438,586 AaAsset-backed securities 253,390 BaaAsset-backed securities 3,272,309 UnratedCommercial mortgage-backed securities 5,268,362 AaaCommercial mortgage-backed securities 865,209 AaCommercial mortgage-backed securities 185,785 BaaCorporate bonds 1,539,362 AaCorporate bonds 6,836,200 ACorporate bonds 15,893,561 BaaCorporate bonds 242,050 BaCorporate bonds 8,035,071 BCorporate bonds 10,227,191 CaaCorporate bonds 82,132 CaGovernment agency notes and debentures 26,922,809 AaaGovernment agency notes and debentures 3,047,550 AaGovernment agency notes and debentures 1,592,126 UnratedNongovernment-backed CMOs 10,377 ANongovernment-backed CMOs 106,262 UnratedShort-term investment funds 25,237,699 Unrated

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Foreign Currency Risk - Foreign currency risk is the risk that an investmentdenominated in the currency of a foreign country could reduce its U.S. dollar value as aresult of changes in foreign currency exchange rates. The pension system restricts theamount of investments in foreign currency-denominated investments to 15 percent oftotal pension system investments. At year end December 31, 2014, the only type ofinvestments which were subject to foreign currency risk were equity investments. Thetotal amount of equity investments which were subject to foreign currency risk at yearend was $17,384,351. At year end, the City of Pontiac General Employees' RetirementSystem had a total foreign currency translation loss of $1,446,515 related to equityinvestments.

Security

Fair Market

Value

Canadian Dollar $ 608,731Hong Kong Dollar 1,878,172Denmark Krone 2,899,049European Euro 1,920,800Japanese Yen 2,272,015Mexican Peso 660,185South African Rand 666,750Swedish Krona 934,314Swiss Franc 3,262,417British Pound 2,281,917

Note 5 - Upcoming Accounting Pronouncements

In February 2015, the Governmental Accounting Standards Board issued GASBStatement No. 72, Fair Value Measurement and Application. The requirements of thisstatement will enhance comparability of financial statements among governments byrequiring measurement of certain assets and liabilities at fair value using a consistent andmore detailed definition of fair value and acceptable valuation techniques. Thisstatement also will enhance fair value application guidance and related disclosures inorder to provide information to financial statement users about the impact of fair valuemeasurements on a government’s financial position. GASB Statement No. 72 isrequired to be adopted for years beginning after June 15, 2015. The System is currentlyevaluating the impact this standard will have on the financial statements when adopted,during the System's year ending December 31, 2016.

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Required Supplemental Information

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Required Supplemental InformationSchedule of Changes in the Plan Net Pension Liability and Related Ratios

Last Fiscal Year(Schedule is built prospectively upon implementation of Statement No. GASB 67)

2014

Total Pension LiabilityService cost $ 279,188Interest 19,973,828Changes in benefit terms -Differences between expected and actual experience (2,538,358)Changes in assumptions -

Benefit payments, including refunds (27,494,450)

Net Change in Total Pension Liability (9,779,792)

Total Pension Liability - Beginning of year 279,931,726

Total Pension Liability - End of year $ 270,151,934

Plan Fiduciary Net PositionContributions - Employer $ -Contributions - Member -Net investment income 29,515,688Administrative expenses (784,783)Benefit payments, including refunds (27,494,450)

Other 17,453

Net Change in Plan Fiduciary Net Position 1,253,908

Plan Fiduciary Net Position - Beginning of year 490,472,887

Plan Fiduciary Net Position - End of year $ 491,726,795

City's Net Pension Asset - Ending $ (221,574,861)

Plan Fiduciary Net Position as a % of Total Pension Asset %182.02

Covered Employee Payroll $ 1,478,241

City's Net Pension Asset as a % of Covered Employee Payroll %14,989.1

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Required Supplemental InformationSchedule of City Contributions

Last Ten Fiscal Years

2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Actuarially determined contribution $ - $ - $ - $ - $ - $ - $ - $ - $ 15,695 $ 16,926Contributions in relation to the actuarially

determined contribution - - - - - - - - 15,695 16,926

Contribution deficiency $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Covered employee payroll $ 1,478,241 $ 1,574,964 $ 2,742,912 $ 3,968,743 $ 9,493,229 $1,255,314,614,414,481 $14,414,486 $13,559,473 $14,996,753 $16,751,815

Contributions as a percentage ofcovered employee payroll %- %- %- %- %- %- %- %- %- %-

Notes to Schedule of System Contributions

Actuarial valuation information relative to the determination of contributions:

Valuation date Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal yearin which the contributions are reported. Contributions for the City's fiscal year ended June 30, 2014 weredetermined based on the actuarial valuation as of December 31, 2011. The most recent valuation is as ofDecember 31, 2014.

Methods and assumptions used to determine contribution rates:

Actuarial cost method Individual entry age

Amortization method Level Dollar, open

Remaining amortization period 30 years

Asset valuation method 5-year smoothed market

Inflation 4.5%

Salary increases 5.6%-9.4% (includes inflation)

Investment rate of return 7.50%

Retirement age Experience-based table of rates are specific to the type of eligibility condition

Mortality 1983 Group annuity table for males and females with a 5-year set forward used for disabled lives

Other information Post-retirement adjustment Court/MAPE - 2.50% of original retirement income for 14 yearsAll others - 2.00% of original retirement income for 18 years.

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Required Supplemental InformationSchedule of Investment Returns

Last Ten Fiscal Years

2014

Annual money weighted rate of return, net of investment expense %6.76

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Documents

City of Pontiac General Employees' Retirement System · Notes to Financial Statements 8-16 Required Supplemental Information 17 Schedule of Changes in the Plan Net Pension Liability